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TMI Blog2017 (1) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the assets, which were part of the Daru Hera unit, even if the assets had not been put to use during the assessment year 2005-2006 and had been sold prior to the end of the accounting year. Both the questions of law are answered in favor of the assessee and against the Revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... f one of the unit, where the assets have been used earlier to the closure. The facts of the case of SRF Ltd. are also distinguishable because the ·assets could not be used in a particular year although they were used in preceding and subsequent years and the Tribunal came to the conclusion that the principle of passive user could be applied. In the case of Yamaha Motor (lndia) Pvt; Ltd. the question was regarding the year in which monies payable in respect of discarded assets could be reduced from the block of assets and, thus, the facts are distinguishable. Position in respect of Vinyl Chemicals (India).Ltd. is also similar. The facts of the case of Dineshkumar Gulabchand Aggarwal are also distinguishable in as much as the newly acquired asset had not been actually used in the business. 11.5 In the instant case, the question is not regarding passive user of the· assets of the business or regarding the year in which sale consideration or the scrap value had to be reduced from the WDV of the blocks of buildings and machinery and plant on Dharuhera unit. These assets were transferred by the assessee in this year. Therefore, these assets' neither belonged to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, it could not claim the benefit of depreciation. He relied upon the previous ruling of this Court in Allied Electronics and Magnetics Ltd. v. CIT (2008) 304 ITR 160. 5. The relevant provisions of the Income Tax Act, 1961 are reproduced as follows: 6. Section 2(11) defines the term "block of assets" and reads as follows: "block of assets" means a group of assets falling within a class of assets comprising- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed ; 7. Section 2(42A) defines capital assets as follows: "short-term capital asset" means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer : 8.. Section 32(1) reads as under: "Depreciation. 32. (1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. Explanation 1.-Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection, unless the context otherwise requires- XXXXXX XXXXXX XXXXXX (6) "written down value" means- XXXXXX XXXXXX XXXXXX (c) in the case of any block of assets,- (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced- (a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets. Appendix to the Rules as noticed above, is not a unit/division specific but is rate of depreciation specific, as all assets prescribed the same rate of depreciation are clubbed and are a part of the same block of assets. The view we have taken finds resonance and acceptance in two decisions of the Delhi High Court in Commissioner of Income Tax versus Eastman Industries Limited, 174 Taxman 344 and Commissioner of Income Tax versus Oswal Agro Mills Limited, (2012) 341 ITR 467 (Del.)." 12. The Court thereafter took into consideration the Direct Taxes Circular no. 469 issued on 23.09.1986. The same reads as follows: "6.3 As mentioned by the Economic Administration Reforms Commission (Report No. 12, para 20), the existing system in this regard requires the calculation of depreciation in respect of each capital asset separately and not in respect of block of assets. This requires elaborate bookkeeping and the process of checking by the Assessing Officer is time consuming. The greater differentiation in rates, according to the date of purchase, the type of asset, the intensity of use, etc., the more disaggregated has to be the record-keeping. Moreover, the practice of granting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm capital gain, which would be exigible to tax and for this reason, we say that there is no loss to Revenue either. 34. The upshot of the aforesaid discussion is that though we are not entirely agreeing with the reasoning of the Tribunal contained in the impugned judgment, we are upholding the conclusion of the Tribunal based on the "block of assets" as discussed above. The consequence would be to dismiss these appeals. However, there will be no order as to costs." 14. Rejecting the contention similar to the one advanced with respect to interpretation of Section 32, the Division Bench in Ansal Properties (supra) observed as follows: "26. Learned counsel for the Revenue has relied upon Section 32 of the Act and has submitted that the effect of the said Section should be examined while computing short term capital gains and interpreting Section 50. It is not possible to accept the said contention. Capital gains is chargeable to tax under Chapter IV-E. The provisions of the said Chapter are independent and separate. The provisions of the said chapter relating to capital gains have to be examined and interpreted. Only if there is a contradiction or conflict, we have to harmoniously ..... X X X X Extracts X X X X X X X X Extracts X X X X
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